Each of the following factors affects the weighted average cost of capital (WACC) equation. Which are factors that a firm cannot control? Check all that apply.

The firms capital structure

The firms dividend payout ratio

Tax rates

Interest rates in the economy

The impact of cost of capital on managerial decisions

Marston Manufacturing Company has two divisions, L and H. Division L is the companys low-risk division and would have a weighted average cost of capital of 9% if it was operated as an independent company. Division H is the companys high-risk division and would have a weighted average cost of capital of 15% if it was operated as an independent company. Because the two divisions are the same size, the company has a composite weighted average cost of capital of 12%. Division H is considering a project with an expected return of 13%.

Marston Manufacturing Company should (REJECT, ACCEPT) the Division Hs project because its return is (GREATER THAN, LESS THAN, SAME) the risk-based cost of capital for the division.

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